Exhibit 4.4


 


SECOND AMENDED AND RESTATED

SUPPLEMENTAL STOCKHOLDERS AGREEMENT


 


Dated as of February 18, 2004


 


By and Among


 


THOMAS H. LEE EQUITY FUND IV, L.P.,

THOMAS H. LEE FOREIGN FUND IV, L.P.,


THOMAS H. LEE FOREIGN FUND IV-B,
L.P.,

THOMAS H. LEE CHARITABLE INVESTMENT L.P.,

THOMAS H. LEE LIMITED PARTNERSHIP,

CAPITAL ARC HOLDINGS, LLC,

NASSAU CAPITAL FUNDS L.P.,

NASSAU CAPITAL PARTNERS II L.P.,

NAS PARTNERS I L.L.C.

and

CERTAIN INDIVIDUALS


 

















 


TABLE OF CONTENTS


 


	
  1.

  	
  Definitions

  	
   

  	
   

  
	
   

  	
   

  	
  1.1

  	
  Affiliate

  	
   

  
	
   

  	
   

  	
  1.2

  	
  Amended and
  Restated Supplemental Agreement

  	
   

  
	
   

  	
   

  	
  1.3

  	
  ARC LP

  	
   

  
	
   

  	
   

  	
  1.4

  	
  ARC Partnership Agreement

  	
   

  
	
   

  	
   

  	
  1.5

  	
  Awarded Shares

  	
   

  
	
   

  	
   

  	
  1.6

  	
  Common Stock

  	
   

  
	
   

  	
   

  	
  1.7

  	
  Common Stock Deemed
  Outstanding

  	
   

  
	
   

  	
   

  	
  1.8

  	
  Deemed Beneficial Ownership

  	
   

  
	
   

  	
   

  	
  1.9

  	
  Effective Date

  	
   

  
	
   

  	
   

  	
  1.10

  	
  Family Member

  	
   

  
	
   

  	
   

  	
  1.11

  	
  Majority Stockholder
  Consent

  	
   

  
	
   

  	
   

  	
  1.12

  	
  Other
  Voting Securities

  	
   

  
	
   

  	
   

  	
  1.13

  	
  Partnership
  Unit

  	
   

  
	
   

  	
   

  	
  1.14

  	
  Permitted
  Transferee

  	
   

  
	
   

  	
   

  	
  1.15

  	
  Person

  	
   

  
	
   

  	
   

  	
  1.16

  	
  Restricted
  Shares

  	
   

  
	
   

  	
   

  	
  1.17

  	
  Securities Act

  	
   

  
	
   

  	
   

  	
  1.18

  	
  Special
  Voting Stock

  	
   

  
	
   

  	
   

  	
  1.19

  	
  Stockholders Common Stock

  	
   

  
	
   

  	
   

  	
  1.20

  	
  Third Party

  	
   

  
	
   

  	
   

  	
  1.21

  	
  Transfer

  	
   

  
	
   

  	
   

  	
  1.22

  	
  Warrant

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Restrictions on Transfer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Additional
  Stockholders

  	
   

  
	
   

  	
   

  	
  3.1

  	
  Transferee of Stockholders

  	
   

  
	
   

  	
   

  	
  3.2

  	
  Supplementary
  Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Miscellaneous

  	
   

  
	
   

  	
   

  	
  4.1

  	
  Binding Effect

  	
   

  
						



 


i

















 


	
   

  	
   

  	
  4.2

  	
  Recapitalizations,
  Exchanges Affecting the Common Stock

  	
   

  
	
   

  	
   

  	
  4.3

  	
  Amendments

  	
   

  
	
   

  	
   

  	
  4.4

  	
  Notices

  	
   

  
	
   

  	
   

  	
  4.5

  	
  Applicable Law

  	
   

  
	
   

  	
   

  	
  4.6

  	
  Section Headings

  	
   

  
	
   

  	
   

  	
  4.7

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
  4.8

  	
  Termination

  	
   

  
	
   

  	
   

  	
  4.9

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
  4.10

  	
  Severability of Provisions

  	
   

  
	
   

  	
   

  	
  4.11

  	
  Specific
  Performance

  	
   

  
	
   

  	
   

  	
  4.12

  	
  Consent
  to Jurisdiction

  	
   

  
	
   

  	
   

  	
  4.13

  	
  Waiver of Right to Jury
  Trial

  	
   

  
	
   

  	
   

  	
  4.14

  	
  No
  Conflicting Agreement

  	
   

  
	
   

  	
   

  	
  4.15

  	
  Effectiveness of Agreement

  	
   

  



 


ii

















 


SECOND AMENDED AND RESTATED

SUPPLEMENTAL STOCKHOLDERS AGREEMENT


 


SECOND AMENDED AND
RESTATED SUPPLEMENTAL STOCKHOLDERS AGREEMENT (this “Agreement”), dated as of
February 18, 2004, by and among Thomas H. Lee Equity Fund IV, L.P.
(“Equity Fund”), Thomas H. Lee Foreign Fund IV, L.P. (“Foreign Fund #1”),
Thomas H. Lee Foreign Fund IV-B, L.P. (“Foreign Fund #2”), Thomas H. Lee
Charitable Investment L.P. (“Charitable Partnership”), Thomas H. Lee Limited
Partnership (“THL Partnership,” and together with Equity Fund, Foreign Fund #1,
Foreign Fund #2 and Charitable Partnership, “THL”), Capital ARC Holdings, LLC
f/k/a UBS Capital ARC Holdings, LLC (“UBS”), Nassau Capital Funds L.P. (“Nassau
Funds”), Nassau Capital Partners II L.P. (“Nassau Partners”), NAS Partners I
L.L.C. (“NAS” and, together with Nassau Funds and Nassau Partners, “Nassau”)
and the individuals listed on the signature pages hereto (collectively,
“Management”). The parties hereto and any other Person who shall hereafter
acquire shares of Common Stock (as defined herein) or Other Voting Securities
of the Company (as defined herein) pursuant to the provisions of and subject to
this Agreement are sometimes referred to individually as a “Stockholder” and
collectively as “Stockholders.” For purposes of this Agreement, each of THL and
Nassau shall be deemed to be one Stockholder.


 


WHEREAS, Affordable
Residential Communities Inc. f/k/a ARC IV REIT, Inc., a Maryland corporation
(the “Company”), on October 20, 2003, filed a registration statement on
Form S-11 (as thereafter amended, the “Form S-11”) with the U.S. Securities and
Exchange Commission (the “SEC”) to register the sale of shares of (i) the Common
Stock by the Company and for the account of certain stockholders of the
Company, and (ii) the Company’s Series A Cumulative Redeemable Preferred Stock,
par value $0.01 per share (the “Preferred Stock”), in each case, pursuant to an
underwritten public offering (the consummation of the sale of the Common Stock
and Preferred Stock, as described in the Form S-11, the “IPO”); and


 


WHEREAS, the parties
hereto desire to amend and restate the Amended and Restated Supplemental
Agreement (as defined herein) effective as of the Effective Date (as defined
herein) to modify certain of its terms.


 


NOW, THEREFORE, the
parties hereto hereby agree as follows:


 

















 


1.             Definitions.


 


As used in this
Agreement, the following terms shall have the meanings ascribed to them below:


 


1.1           Affiliate. The term “Affiliate” shall mean, with
respect to a Person (as defined herein), (i) any other Person that, directly or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with such Person, (ii) any other Person that is an
officer, director, managing member or other similar management official of such
Person or (iii) any Person that directly or indirectly is the beneficial owner
of 20% or more of any class of equity securities or other ownership interests
of such Person, or of which such Person is directly or indirectly the owner of
20% or more of any class of equity securities or other ownership interests.


 


1.2           Amended and Restated Supplemental
Agreement. The term “Amended and Restated Supplemental Agreement” shall
mean that Amended and Restated Supplemental Stockholders Agreement, dated as of
April 8, 2002, by and among Thomas H. Lee Equity Fund IV, L.P., Thomas H.
Lee Foreign Fund IV, L.P., Thomas H. Lee Foreign Fund IV-B, L.P., Thomas H. Lee
Charitable Investments Limited Partnership, Thomas H. Lee Investors Limited
Partnership, Capital ARC Holdings, LLC, The Travelers Indemnity Company, Nassau
Capital Fund L.P., Nassau Capital Partners II, L.P., NAS Partners I, L.L.C. and
the individuals listed on the signature pages thereto, as thereafter in effect
prior to the date hereof.


 


1.3           ARC LP. The term “ARC LP” shall mean Affordable
Residential Communities LP, f/k/a Affordable Residential Communities IV, LP, a
Delaware limited partnership.


 


1.4           ARC Partnership Agreement. The term
“ARC Partnership Agreement” shall mean the First Amended and Restated Agreement
of Limited Partnership of ARC LP, amended and restated as of February 11,
2004, by and among the Company, as general partner, and the limited partners
set forth on Exhibit A thereto, as amended from time to time.


 


1.5           Awarded Shares. The term “Awarded Shares” shall
mean any shares of Common Stock, including Restricted Shares (as defined
herein), awarded to any member


 


2

















 


of Management pursuant to
the Company’s 2003 Equity Incentive Plan, as amended from time to time, or any
successor or similar equity incentive compensation plan of the Company
(including, without limitation, all shares of Common Stock granted to any
member of Management immediately prior to the consummation of the IPO).


 


1.6           Common Stock. The term “Common Stock” shall mean
the common stock, par value $.01 per share, of the Company.


 


1.7           Common Stock Deemed Outstanding.
The term “Common Stock Deemed Outstanding” shall mean, as of any date, the
total number of shares of Common Stock outstanding as of such date plus the
total number of shares of Common Stock that may be acquired upon exercise,
conversion or exchange of all options, warrants or other securities (including,
without limitation, Partnership Units) or rights convertible into or
exercisable or exchangeable for shares of Common Stock that were outstanding as
of such date.


 


1.8           Deemed Beneficial Ownership. The term
“Deemed Beneficial Ownership” shall mean, with respect to any Stockholder as of
any date, the percentage obtained by dividing (a) the total number of shares of
Common Stock owned of record or beneficially by such Stockholder as of such
date plus the total number of shares of Common Stock that may be acquired by
such Stockholder upon exercise, conversion or exchange of all options, warrants
or other securities (including, without limitation, Partnership Units) or
rights convertible into or exercisable or exchangeable for shares of Common
Stock that were held by such Stockholder as of such date, by (b) the Common
Stock Deemed Outstanding as of such date.


 


1.9           Effective Date. The term “Effective Date” shall
mean the date of the first closing with respect to the IPO.


 


1.10         Family Member. The term “Family Member” shall
mean, as to a Person that is an individual, such Person’s spouse, ancestors,
descendants (whether by blood or by adoption), brothers and sisters and all
inter vivos or testamentary trusts of which only such Person and his spouse,
ancestors, descendants (whether by blood or by adoption), brothers and sisters
are beneficiaries.


 


1.11         Majority Stockholder Consent. The
term “Majority Stockholder Consent” shall mean the affirmative written consent
of the Stockholders representing not less than a majority of the Stockholders
Common Stock.


 


3

















 


1.12         Other Voting Securities. The term “Other
Voting Securities” shall mean any securities of the Company (other than Special
Voting Stock (as defined herein)) that provide its registered holders the right
to vote collectively with the holders of Common Stock on all matters submitted
to a vote of stockholders of the Company.


 


1.13         Partnership Unit. The term “Partnership Unit” shall
have the meaning assigned to such term in the ARC Partnership Agreement and, in
the case of any Paired Common Unit (as defined in the ARC Partnership
Agreement), shall include any share or shares of Special Voting Stock paired
therewith.


 


1.14         Permitted Transferee. The term “Permitted
Transferee” shall mean (A) with respect to any Stockholder, (i) the Company or
(ii) any Affiliate of such Stockholder (B) with respect to any Stockholder that
is an individual, in addition to those Persons listed in the foregoing clause
(A), (i) any Family Member of such Stockholder or (ii) any Person of which all
of the beneficial owners are Family Members of such Stockholder, provided,
however, that in the case of a Transfer of Common Stock or Other Voting
Securities by any individual Stockholder to any Person contemplated by
subclause (i) or (ii) of this clause (B), the transferring Stockholder shall
retain the right to vote such shares following such Transfer except, in the
case of Transfers for tax or estate planning purposes, when to do so would
result in a failure to effectuate the purpose of the Transfer, and (C) in the
case of Nassau, in addition to those Persons listed in the foregoing clause
(A), any Person who is an investor, partner or member of Nassau Funds, Nassau
Partners or NAS, but only in the case of a distribution of Common Stock or
Other Voting Securities made by Nassau Funds, Nassau Partners or NAS to any
such Person.


 


1.15         Person. The term “Person” shall mean an individual,
corporation, partnership, trust, joint venture, limited liability company,
unincorporated organization or other legal entity, or a government or any
agency or political subdivision thereof.


 


1.16         Restricted Shares. The term “Restricted
Shares” shall mean shares of Common Stock granted by the Company pursuant to
the Company’s 2003 Equity Incentive Plan, as amended from time to time, or any
successor or similar equity incentive compensation plan of the Company, which
shares are subject to any restriction on transfer as provided for in such plan
and/or in any grant agreement governing the award of such shares; provided,
that no share of Common Stock shall constitute a “Restricted Share” for
purposes of this Agreement to the extent that the transfer restrictions
applicable to such


 


4

















 


share as set forth in the
plan and in any grant agreement pursuant to which such share was granted have
lapsed or are otherwise no longer effective.


 


1.17         Securities Act. The term “Securities Act” shall
mean the Securities Act of 1933, as amended, or any federal statute then in
effect which has replaced such statute, and a reference to a particular
section thereof shall be deemed to include reference to the comparable
section, if any, of any such replacement federal statute.


 


1.18         Special Voting Stock. The term “Special
Voting Stock” shall mean the special voting stock, par value $.01 per share, of
the Company.


 


1.19         Stockholders Common Stock. The term
“Stockholders Common Stock” shall mean, as of any date, the total number of
shares of Common Stock owned by the Stockholders as of such date plus the total
number of shares of Common Stock which may be acquired by the Stockholders upon
exercise, conversion or exchange of all options, warrants or other securities
(including, without limitation, Partnership Units) or rights convertible into
or exercisable or exchangeable for shares of Common Stock that were outstanding
as of such date and held by any Stockholder; provided, however,
that no Person shall be deemed to be a Stockholder for purposes of this
definition to the extent that this Agreement has terminated with respect to
such Person pursuant to subclause (iv) of Section 4.8 hereof.


 


1.20         Transfer. The term “Transfer” shall mean any direct or
indirect sale, assignment, mortgage, transfer, pledge, gift, hypothecation or
other disposition or transfer of, or any act creating a trust (voting or
otherwise) with respect to, Common Stock or Other Voting Securities of the
Company, other than any bona  fide pledge or hypothecation to a
financial institution(s), in connection with any loan(s) from such financial
institution(s), of (A) in the case of any Stockholder that is not a member of
Management, shares of Common Stock or Other Voting Securities constituting less
than 2.5% of the Common Stock Deemed Outstanding and (B) in the case of any
Stockholder who is a member of Management, up to the greater of (1) 25% of the
total number of shares of Common Stock and Other Voting Securities held by such
Stockholder and (2) such number of Awarded Shares held by such Stockholder as
shall be necessary to secure a loan or loans the proceeds of which are used to
fund tax liabilities and/or tax withholding obligations with respect to the
granting of such Awarded Shares, assuming a 30% tax rate; provided, however,
that in the case of each of Messrs. Scott D. Jackson and John G. Sprengle, in
addition to the foregoing, the term “Transfer” shall not include any donation
or gift of


 


5

















 


Common Stock and Other
Voting Securities to Colorado State University (i) not exceeding, for each of
Messrs. Jackson and Sprengle, $100,000 in Fair Market Value (as defined herein)
in any one year and (ii) of such other number of shares of Common Stock and
Other Voting Securities as THL and each of Messrs. Jackson and Spregle shall
agree through good faith discussions may be so donated or gifted..


 


1.21         Warrant. The term “Warrant” shall mean the warrants
to purchase Common Stock, dated prior to August 9, 2000, held by THL and
the other Persons who were stockholders of the Company at the time such
warrants were issued.


 


2.             Restrictions on
Transfer.


 


(a)           Without the consent of each of THL,
UBS and Nassau, none of THL, UBS or Nassau may Transfer any Common Stock, Other
Voting Securities or all or any portion of the Warrant (other than (x) to
another Stockholder, (y) to a Permitted Transferee or (z) in a registered
offering pursuant to rights granted under that certain Third Amended and
Restated Registration Rights Agreement, dated as of February 18, 2004, by
and among the Company and the parties listed on Exhibits A through D thereto),
unless a Person or Persons other than the Company shall have previously sold
Common Stock, Other Voting Securities or all or any portion of the Warrant to
the public in an offering registered under the Securities Act following the IPO
(it being understood that the sale of Common Stock, Other Voting Securities or
all or any portion of the Warrant by any Person or Persons other than the
Company pursuant to a “shelf” registration statement shall not constitute a
sale “to the public in an offering registered under the Securities Act
following the IPO” for purposes of this Section 2(a)). Notwithstanding
anything to the contrary contained herein, at such time as (i) the Deemed
Beneficial Ownership of THL is less than 5%, then THL shall be stricken from
this Section 2(a), (ii) the Deemed Beneficial Ownership of UBS is less
than 5%, then UBS shall be stricken from this Section 2(a), and (iii) the
Deemed Beneficial Ownership of Nassau is less than 5%, then Nassau shall be
stricken from this Section 2(a), provided, however, that in
the event the Deemed Beneficial Ownership of any Permitted Transferee of any of
THL, UBS or Nassau is 5% or more upon the completion of the transfer to such
Permitted Transferee, then such Permitted Transferee shall be bound by the
covenants contained in this Section 2(a) to the same extent as the
transferor thereof was so bound before such transfer. In the event that any
Permitted Transferee becomes bound by the covenants contained in this
Section 2(a), such Permitted Transferee and the transferring Stockholder
shall provide notice to each of the other Stockholders who at such time is
subject to the covenants contained in this Section 2(a)


 


6

















 


of the name of a
representative of such Permitted Transferee and all other notice information
commensurate with the information with respect to each Stockholder set forth in
Section 4.4 hereof.


 


(b)           Without the consent of THL, no
Management Stockholder (as defined herein) may Transfer any shares of Common
Stock or Other Voting Securities (other than to a Permitted Transferee) if such
proposed Transfer would cause the Relative Percentage of Fully Diluted
Securities (as defined herein) of such Management Stockholder immediately
following the effective time of the proposed transfer (the “Determination
Time”) to be less than THL’s Relative Percentage of Fully Diluted
Securities as of such Determination Time. With respect to any Stockholder, the
“Relative Percentage of Fully Diluted Securities” as of any
Determination Time shall mean the quotient obtained by dividing (A) the total
number of shares of Common Stock and Other Voting Securities owned by such Stockholder
as of such Determination Time, plus the total number of shares of Common Stock
and Other Voting Securities that may be acquired by such Stockholder upon
exercise, conversion or exchange of all options, warrants or other securities
(including, without limitation, all Partnership Units) or rights convertible
into or exercisable or exchangeable for shares of Common Stock or Other Voting
Securities that were owned by such Stockholder as of such Determination Time,
by (B) the total number of shares of Common Stock and Other Voting Securities
owned by such Stockholder as of the Effective Date (following completion of the
IPO), plus (1) the total number of shares of Common Stock and Other Voting
Securities that may be acquired by such Stockholder upon exercise, conversion
or exchange of all options, warrants or other securities (including, without
limitation, all Partnership Units) or rights convertible into or exercisable or
exchangeable for shares of Common Stock or Other Voting Securities that were owned
by such Stockholder as of the Effective Date (following completion of the IPO),
plus (2) the total number of shares of Common Stock and Other Voting Securities
acquired (other than pursuant to the exercise, conversion or exchange of any
options, warrants or other securities (including, without limitation, any
Partnership Units) or rights owned by such Stockholder as of the Effective
Date), or which may be acquired upon the exercise, conversion or exchange of
any options, warrants or other securities (including, without limitation, any
Partnership Units) or rights acquired, by such Stockholder after the Effective
Date; provided, however, that no shares of Common Stock or Other
Voting Securities that may be acquired upon exercise, conversion or exchange of
any options, warrants or other securities (other than Partnership Units) or
rights convertible into or exercisable or exchangeable for shares of Common
Stock or Other Voting Securities shall be included for any part of the
calculation of any Stockholder’s Relative Percentage of Fully Diluted


 


7

















 


Securities (including,
without limitation, the calculation under clause (B)(1) above) if either (x)
such option, warrant or other security or right has expired unexercised as of
the relevant Determination Time or (y) the Stockholder owns such option,
warrant or other security or right as of the relevant Determination Time but
the exercise or conversion price per share of such option, warrant or other
security or right is greater than the Fair Market Value of the Common Stock or
Other Voting Securities, as applicable, as of such Determination Time; and provided
further, that for purposes of any part of the calculation of any
Stockholder’s Relative Percentage of Fully Diluted Securities, the term “Common
Stock” shall not include any shares that, as of the relevant Determination
Time, are Restricted Shares.  “Management
Stockholder” means any Stockholder who is a member of Management and any
Stockholder who becomes a party to this Agreement after the Effective Date who
is designated as such in the supplementary agreement executed by such
Stockholder as contemplated by Section 3 hereof.  “Fair Market Value” means (i) with respect to the Common
Stock and, if listed or quoted as described below, Other Voting Securities, the
average of the closing sale prices of the Common Stock as reported on the
national securities exchange on which the Common Stock is listed or, if not so
listed, as quoted on The Nasdaq Stock Market, for the ten consecutive trading
days ending on the fifth trading day prior to the relevant Determination Time
and (ii) with respect to Other Voting Securities not so listed or quoted as
described in clause (i) above, the value determined by a majority of the members
of the Board of Directors of the Company deemed by such Board to be
“independent” under the listing standards of the New York Stock Exchange or
other applicable stock exchange or quotation system, in any case pursuant to
this clause (ii), as of the relevant Determination Time.


 


(c)           The covenants and agreements
contained in Section 2(a) shall expire and be of no further force or
effect following the 180th day following the completion of the
IPO.  The covenants and agreements
contained in Section 2(b) shall expire and be of no further force or
effect immediately upon the effective date of any transaction following which
THL’s Relative Percentage of Fully Diluted Securities is less than or equal to
40%.  The covenants and agreements
contained in Section 2(b) also shall cease to apply with respect to any
securities owned by a Management Stockholder that are not Awarded Shares
immediately upon and following such time as such Management Stockholder is no
longer an employee of the Company or any of its subsidiaries.


 


(d)           Notwithstanding anything to the
contrary contained herein, it is expressly understood and agreed that any and
all shares of Common Stock or Other Voting Securities that are gifted or
donated by a Stockholder, or that are disposed of by


 


8

















 


one or more lending
institutions pursuant to a pledge made by a Stockholder, in each case, as
permitted by the exceptions to the definition of “Transfer” set forth herein,
shall not be included in the numerator of any calculation of such Stockholder’s
Relative Percentage of Fully Diluted Securities made from and after the time of
such gift, donation or disposition, as the case may be.


 


3.             Additional Stockholders.


 


3.1           Transferee of Stockholders. No
Transfer of shares of Common Stock or Other Voting Securities may be made to a
Permitted Transferee (other than the Company) unless, in each case, prior to
such Transfer such Permitted Transferee agrees in writing to be bound (to the
same extent as contemplated with respect to the Stockholder (or the Permitted
Transferee(s) thereof) transferring such shares of Common Stock or Other Voting
Securities) by the terms and conditions of this Agreement pursuant to a
supplementary agreement reasonably satisfactory in form and substance to the
Stockholders pursuant to a Majority Stockholder Consent.  The provisions of this Section 3.1
shall not apply to any Transfer made by THL, UBS or Nassau following the 180th
day following the completion of the IPO.


 


3.2           Supplementary Agreement. Any
supplementary agreement executed pursuant to Section 3.1 above or
otherwise in connection with this Agreement shall become effective upon its
execution by the new holder of Common Stock and shall not require the
signatures or the consent of the other Stockholders (or their respective
Permitted Transferees).


 


4.             Miscellaneous.


 


4.1           Binding Effect. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns.


 


4.2           Recapitalizations, Exchanges Affecting the
Common Stock. Except as otherwise specifically provided herein, the
provisions of this Agreement shall apply, to the full extent set forth herein,
with respect to the Common Stock and Other Voting Securities and to any and all
securities, including Preferred Stock, of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) that may be issued in respect of, in exchange for or in substitution
of the Common Stock or


 


9

















 


Other Voting Securities
by reason of a stock dividend, stock split, stock issuance, reverse stock
split, combination, recapitalization, reclassification, merger, consolidation
or otherwise. Upon the occurrence of any of such events, amounts hereunder
shall be appropriately adjusted.


 


4.3           Amendments. This Agreement may be amended only by a
written instrument signed by each of the Persons who are parties to this
Agreement at the time of such amendment.


 


4.4           Notices. Any notice and other communication (facsimile
transmission shall not be a valid means of notice under this Agreement)
provided for herein shall be dated and in writing and shall be deemed to have
been duly given when received by the party to whom such notice or other
communication is directed at the following addresses:


 


(a)           If to THL, to it at the following
address:


 


Thomas H. Lee Company


75 State Street, Suite
2600


Boston, Massachusetts
02109


Attention: Todd Abbrecht


Facsimile No.:
617-227-3514


 


with a copy to:


 


Weil, Gotshal &
Manges LLP


100 Federal Street – 34th
Floor


Boston, Massachusetts
02110


Attention: James Westra,
Esq.


      Andrew M. Troop, Esq.


Facsimile No.:
617-772-8333


 


(b)           If to UBS, to it at the following
address:


 


Capital ARC Holdings, LLC


c/o UBS Capital


48 Signal Road


Stamford, CT 06902


 


10

















 


with a copy to:


 


Clifford Chance US LLP


200 Park Avenue


New York, New York 10166


Attention: Larry P.
Medvinsky, Esq.


Facsimile No.:
212-878-8375.


 


(c)           If to Nassau, to it at the following
address:


 


Nassau Capital Funds L.P.


22 Chambers Street


Princeton, NJ 08542


Attention: Robert L.
Honstein


Facsimile No.:
609-924-8887


 


with a copy to:


 


Kirkland & Ellis


Citicorp Center


153 East 53rd
Street


New York, New York
10022-4675


Attention:  Kirk Radke, Esq.


Facsimile No.:  (212) 446-4900


 


(d)           If to one or more Management
Stockholders, to such Stockholder(s) at the following address:


 


Management Stockholders


c/o Affordable Residential
Communities Inc.


600 Grant Street, Suite
900


Denver, Colorado  80203


Attention: Scott L.
Gesell


Facsimile No.:
303-294-0085


 


11

















 


4.5           Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Maryland without
giving effect to the conflicts of law principles thereof.


 


4.6           Section Headings. The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of terms contained herein.


 


4.7           Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.


 


4.8           Termination. This Agreement (other than Sections
4.4, 4.5, 4.8, 4.9, 4.10, 4.11, 4.12, and 4.13) shall terminate upon the
earliest of (i) the written consent of each of the parties hereto, (ii)
February 18, 2007, (iii) the date on which the covenants in
Section 2(b) shall expire in accordance with Section 2(c) hereof, and
(iv) as to any Stockholder (and its Affiliates), the date on which such
Stockholder (collectively with its Affiliates) either no longer beneficially
owns or holds of record any shares of Common Stock or Other Voting Securities
(including, with respect to all Stockholders, as a result of any transaction in
which the Company is a constituent company in a merger and in connection
therewith the outstanding shares of Common Stock are converted into or
exchanged for securities of another Person and/or cash or other property) or
otherwise is no longer party to or bound by any of the covenants contained in
Sections 2(a) and 2(b) of this Agreement.


 


4.9           Entire Agreement. This Agreement
constitutes the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and there are no restrictions,
promises, representations, warranties, covenants or undertakings with respect
to the subject matter hereof, other than those expressly set forth or referred
to herein. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof, including
the Amended and Restated Supplemental Agreement.


 


4.10         Severability of Provisions. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.


 


12

















 


4.11         Specific Performance. Each of the Stockholders
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party or parties would be irreparably harmed, no adequate remedy
at law would exist and damages would be difficult to determine. It is
accordingly agreed that (x) in the event of a breach of any provision of this
Agreement, the aggrieved party shall be entitled to specific performance of
this Agreement and to enjoin any continuing breach of this Agreement (without
the necessity of proving actual damages and without posting bond or other
security), in addition to any other remedy to which such aggrieved party may be
entitled at law or in equity and (y) each Stockholder hereby waives the
defense, in any action for specific performance or other equitable relief, that
a remedy at law would be adequate.


 


4.12         Consent to Jurisdiction. Each
Stockholder, by its execution hereof, (i) hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts located in the County of
New York, State of New York for the purposes of any claim or action arising out
of or based upon this Agreement or relating to the subject matter hereof, (ii)
hereby waives, to the extent not prohibited by applicable law, and agrees not
to assert by way of motion, as a defense or otherwise, in any such claim or
action, any claim that it or he is not subject personally to the jurisdiction
of the above-named courts, that its or his property is exempt or immune from
attachment or execution, that any such proceeding brought in the above-named
court is improper or that this Agreement or the subject matter hereof may not
be enforced in or by such court and (iii) hereby agrees not to commence any
claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof other than before the above-named courts nor to make any
motion or take any other action seeking or intending to cause the transfer or
removal of any such claim or action to any court other than the above-named courts
whether on the grounds of inconvenient forum or otherwise. Each Stockholder
hereby consents to service of process in any such proceeding in any manner
permitted by New York law and agrees that service of process by registered or
certified mail, return receipt requested, at its address specified pursuant to
Section 4.4 hereof is reasonably calculated to give actual notice.


 


4.13         Waiver of Right to Jury Trial. Each
Stockholder, by its execution hereof, waives its right to a jury trial of any
claim or cause of action based upon or arising out of this Agreement or any
dealings between them relating to the subject matter of this transaction and
the relationship that is being established. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this Agreement, including,
without limitation, contract claims, tort claims,


 


13

















 


breach of duty claims and
all other common law and statutory claims. Each Stockholder acknowledges that
this waiver is a material inducement to enter into a business relationship,
that each has already relied on the waiver in entering into this Agreement and
that each will continue to rely on the waiver in its related future dealings.
Each Stockholder further warrants and represents that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives its
jury trial rights following consultation with legal counsel. This waiver is
irrevocable, meaning that it shall apply to any subsequent amendments,
renewals, supplements or modifications to this Agreement or to any other
documents or agreements relating to the transaction contemplated hereby. In the
event of litigation, this Agreement may be filed as a written consent to a
trial by the court.


 


4.14         No Conflicting Agreement. No Stockholder
will, on or after the date of this Agreement, enter into any agreement with
respect to the shares of Common Stock, Other Voting Securities or any other
securities of the Company beneficially owned or held of record by it that
conflicts with the provisions hereof.


 


4.15         Effectiveness of Agreement. This
Agreement shall be of no force or effect until the Effective Date, and upon
completion of the IPO on such date, this Agreement shall be in full force and
effect and the Amended and Restated Supplemental Agreement shall be deemed
amended and restated in its entirety hereby.


 


14

















 


IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first written above.


 


 


	
  THOMAS
  H. LEE EQUITY

  FUND IV, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  THL
  Equity Advisors IV, LLC,

  its General Partner

  
	
   

  	
   

  
	
  By:

  	
  Thomas
  H. Lee Partners, L.P.,

  its Managing Member

  
	
   

  	
   

  
	
  By:

  	
  Thomas
  H. Lee Advisors, LLC,

  its General Partner

  
	
   

  	
   

  
	
  By:

  	
  /s/ Thomas H. Lee

  	
   

  
	
   

  	
  Name:

  	
  Thomas H. Lee

  
	
   

  	
  Title:

  	
  Principal Managing

  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
  THOMAS
  H. LEE FOREIGN

  FUND IV, L.P.

  
	
   

  	
   

  
	
  By:

  	
  THL
  Equity Advisors IV, LLC,

  its General Partner

  
	
   

  	
   

  
	
  By:

  	
  Thomas
  H. Lee Partners, L.P.,

  its Managing Member

  
	
   

  	
   

  
	
  By:

  	
  Thomas
  H. Lee Advisors, LLC,

  its General Partner

  
	
   

  	
   

  
	
  By:

  	
  /s/ Thomas H. Lee

  	
   

  
	
   

  	
  Name:  Thomas H. Lee

  
	
   

  	
  Title:

  	
  Principal Managing

  
				



 

















 


	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
  THOMAS
  H. LEE CHARITABLE

  INVESTMENT L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Thomas H. Lee

  	
   

  
	
   

  	
  Name:

  	
  Thomas H. Lee

  
	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  
	
  THOMAS
  H. LEE

  LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
  By:

  	
  THL
  Investment Management Corp.,

  its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Thomas H. Lee

  	
   

  
	
   

  	
  Name: Thomas H. Lee

  
	
   

  	
  Title: General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
  THOMAS
  H. LEE FOREIGN

  FUND IV-B, L.P.

  
	
   

  	
   

  
	
  By:

  	
  THL
  Equity Advisors IV, LLC,

  its General Partner

  
	
   

  	
   

  
	
  By:

  	
  Thomas
  H. Lee Partners, L.P.,

  its Managing Member

  
	
   

  	
   

  
	
  By:

  	
  Thomas
  H. Lee Advisors, LLC,

  its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Thomas H. Lee

  	
   

  
	
   

  	
  Name:

  	
  Thomas H. Lee

  
	
   

  	
  Title:

  	
  Principal Managing

  
				



 

















 


	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MANAGEMENT
  SIGNATURE PAGE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Scott D. Jackson

  	
   

  	
   

  
	
   

  	
  Scott D. Jackson

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ John G. Sprengle

  	
   

  	
   

  
	
   

  	
  John G. Sprengle

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ George W. McGeeney

  	
   

  
	
   

  	
  George W. McGeeney

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Lawrence E. Kreider

  	
   

  	
   

  
	
   

  	
  Lawrence E. Kreider

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Scott L. Gesell

  	
   

  	
   

  
	
   

  	
  Scott L. Gesell

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ R. Haynes Chidsey

  	
   

  	
   

  
	
   

  	
  R. Haynes Chidsey

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Peter Pak

  	
   

  	
   

  
	
   

  	
  Peter Pak

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Scott Vanderhoofven

  	
   

  	
   

  
	
   

  	
  Scott Vanderhoofven

  	
   

  
														



 

















 


	
  CAPITAL ARC HOLDINGS, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael Greene

  	
   

  	
   

  
	
   

  	
  Name: Michael Greene

  	
   

  
	
   

  	
  Title: Partner

  	
   

  
				



 

















 


	
  NASSAU CAPITAL FUNDS L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Randall A. Hack

  	
   

  	
   

  
	
   

  	
  Name: Randall A. Hack

  	
   

  
	
   

  	
  Title: Sr. Managing
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NASSAU CAPITAL PARTNERS II L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Randall A. Hack

  	
   

  	
   

  
	
   

  	
  Name: Randall A. Hack

  	
   

  
	
   

  	
  Title: Sr. Managing
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NAS PARTNERS I L.L.C.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Randall A. Hack

  	
   

  	
   

  
	
   

  	
  Name: Randall A. Hack

  	
   

  
	
   

  	
  Title: Sr. Managing
  Director